Financial sustainability top challenge for charity leaders

6 December 2022

Charity Aid Foundation’s (CAF) annual survey of charity leaders was published last week, revealing that 58% of the charity leaders surveyed said that their number one challenge was to generate income and achieve financial sustainability. 21% of charities said they planned to use charity reserve funds to cover income shortfalls rather than for capital expenditure – this was twice as many as in 2019 (10%).

The second challenge facing charity leaders is meeting demand for services (30%), followed by a reduction in public/government funding (26%). Despite these challenges, the majority of charity leaders 81% are optimistic about the future of their organisation, “with the level of optimising increasing in line with charity income”. Optimism is lowest amongst those whose organisations have an income of less than £1m.

When it comes to demand for charities’ services, most leaders (86%) expected demand to continue to increase following the pandemic. 80% were confident they could meet this demand, but were less optimistic about the wider sector, especially around government support for the sector. Leaders of English charities (74%) are much more likely to be pessimistic than leaders in Scotland (42%) or Northern Ireland (57%). The pandemic has had little impact on these views, which are largely unchanged since 2019.

The CAF Charity Landscape report makes a number of recommendations and encourages funders to do the following:

• Consider charity resilience when looking at a funding request. While charities need core funding, giving charities the time and space to identify areas where they need to strengthen their organisation, be it leadership or financial acumen skills for senior leaders, will be vital to their long term success
• Grant makers should be sure to share any plans to shift funding priorities or information about new funds, or the reopening up of funding programmes which were impacted by the pandemic. Charity leaders looking to rebalance their finances would welcome any predictability in the funding landscape.
• Multi-year funding, be it from philanthropy or Government should become the norm and should be unrestricted. This would help charities to become more resilient and enhance the relationship between the grant makers and the people and communities they are eager to serve.